It’s an exciting and dramatic time in the Pacific for HIV and TB control. The Round 7 HIV and TB Grants are nearing completion of Phase 1, and over the last few months the Ministries of Health of the 11 target PICTs, along with the many technical agencies involved in supporting grant implementation, have been busily engaged in envisioning, designing and planning Phase 2 of the grant. The decisions we make now will affect the health and livelihood of people living in these PICTs up until 2013. It’s a crucial time.As we work together to design the next chapter of these Global Fund grants, it is important that we take a moment to think about how the Global Fund itself, as a funding mechanism, is changing. One major area of change that will impact on all Global Fund grants across the world is the introduction of more rigorous financial reporting requirements.

Why have these changes been put into place?

In 2009, an audit was conducted of all Global Fund grants to the Philippines. The audit, conducted by the Office of the Inspector General, was part of a routine program of quality and transparency assurance. In line with standard Global Fund audit practice, the objectives of the audit were to assess the efficiency and effectiveness in the management and operations of grants, to measure the soundness of management systems and policies in safeguarding Global Fund resources and to identify any risks to which any of the Global Fund grants might be exposed. The audit was major, in terms of the dollars at stake, certainly by Pacific standards. The total value of all grants reviewed exceeded US $200 million. The findings of this audit were grave. The OIG’s recommendation was that it was not safe to invest program funds through the systems at the Tropical Disease Foundation (TDF), the Global Fund’s largest funds recipient in the Philippines, receiving more than 80% of disbursed funds. On 24 September 2009, the Global Fund suspended all five running grants to the TDF. For those interested in the details, the detailed list of weaknesses identified within the systems and operations of TDF can be found in the “Audit Report on Global Fund Grants to the Philippines” (2009). To summarise, the TDF was found to be severely lacking in the governance, financial and programmatic systems required to accountably and transparently manage the grants. It was also found that the TDF owed the Global Fund over US $1.75 million in misused funds.

The OIG’s recommendations for responding to these weaknesses were extensive. (again the complete list of recommendations can be found in the report). Over fifty priority areas of action were identified. To summarise, a complete overhaul of financial and HR systems was recommended, along with significant restructuring of the policy and procedural environment surrounding it.

How will this impact on us in the Pacific?

The Philippines’ Department of Health and the TDF have a long way to go before the many required reforms are complete. The impact of financial mismanagement in the Philippines will affect its citizens for many years to come.

In the Pacific, as we move into the next three years of grant implementation, we should take what happened in the Philippines as a cautionary tale and a reminder of how important it is that our systems are transparent, and effective. National CCM’s, MOH staff, MOF staff and non-government implementers all share this responsibility.

The Global Fund’s risk management processes can be expected to become more rigorous and demanding in the current years, and to ensure grant continuation we all need to share the responsibility of ensuring vigilance in financial management.

The list below shows just a few of the key issues identified as part of the audit in the Philippines. Each of these issues is relevant and significant in the Pacific.

Asset Register

An up to date asset register could not be produced, despite having produced a large number of assets by the time of the audit. Entries in the register did not contain details of the date the equipment was acquired, proper specifications, value and the condition of the asset.

Transferring Funds

Funds were transferred to general accounts, without any justification or supporting documentation. The treasury management system had inadequate procedures and processes for tracking the movement of funds into and out of the GF account.

Double charging

Overhead costs in particular had been double charged to the Global Fund. Budgeting and financial tracking systems did not adequately separate PR administrative costs from program implementation costs.

The transition into Phase 2 of the TB and HIV grants is an exciting time in the Pacific. Significant new activities will be introduced to TB and HIV programs across the Pacific, as we move toward measuring overall impact in the fight against TB and HIV. As we move into the next three years of implementation we need also to be mindful of the great importance of maintaining transparent and efficient financial and governance systems.

For more information, please find below the link to the Audit Report on Global Fund Grants to the Philippines, 2009: